Maruti Suzuki third quarter profit soars on sales of pricier cars

Maruti Suzuki India, the country's top-selling car maker, posted a 48 percent rise in quarterly profit as demand for its pricier vehicles such as the Brezza crossover offset a cooling of overall sales growth caused by India's demonetisation move.
A shift to higher priced cars has helped Maruti to avoid the hit suffered by some rivals and counter the impact of Prime Minister Narendra Modi's November move to declare currency notes of 500 rupees and 1,000 rupees as illegal tender, taking about 86 percent of money out of circulation.
The ban sparked a severe cash crunch that has disrupted economic activity, leading to the biggest monthly fall in India's automobile sales in 16 years in December.
Maruti, which is majority owned by Japan's Suzuki Motor Corp , said in a statement on Wednesday its net profit for the three months ended December 31 rose to 17.45 billion rupees ($256 million) from 11.83 billion in the year-ago quarter. The year-ago net profit was adjusted to reflect new accounting rules adopted by India.
Analysts had expected it to post a profit of 17.47 billion rupees, according to Thomson Reuters data.
Total income from operations of the car maker rose 13 percent to 191.7 billion rupees.
Maruti's net sales rose 12 percent to 166.24 billion rupees, helped by growing demand for cars like the Brezza and Baleno hatchback, despite just a 3.5 percent increase in its total sales volumes during the quarter.
"Increase in share of the company's higher segment models, lower sales promotion and marketing expense, cost reduction efforts and higher non-operating income contributed to increase in profits," the company said in a statement.
Suzuki, which owns 56.2 percent of Maruti, gets the bulk of its revenues from Maruti which is valued by the market at about $25 billion, higher than the Japanese company's market capitalisation of about $18.5 billion.
Maruti sold a total of 387,251 passenger vehicles, including exports, during the quarter. Total passenger vehicle sales of India's automakers, including exports, rose about 5 percent to 958,519 units.
Mumbai-based brokerage Kotak Institutional Equities expects that in the current fiscal year to end-March, about 50 percent of Maruti's domestic sales will come from its higher-priced cars compared with less than 30 percent three years ago. "Maruti's strategy to retain entry-level customers and make money when they upgrade has worked well," Hiten Goel, analyst at Kotak, said in a report dated January 19.